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TMI Blog2019 (8) TMI 1784X X X X Extracts X X X X X X X X Extracts X X X X ..... also, in view of the ratio laid down by Hon ble Supreme Court, in MEGHALAYA STEELS LTD [ 2016 (3) TMI 375 - SUPREME COURT] - Accordingly, findings of the A.O. are erroneous and therefore, disallowance is deleted. Thus we restore the issue in dispute to the file of the Assessing Officer to decide in accordance with the direction of the Tribunal - The grounds of the appeal of the Revenue are accordingly allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case, are that the 'Flexible Packaging Unit' and 'Rubber Thread Unit' of existing Company M/s Dharampal Satyapal Ltd. got demerged w.e.f. 01.4.2006, vide order of Hon'ble Delhi High Court dated 11.9.2007 and the resultant companies were named as M/s Avichal Buildcon Pvt. Ltd and M/s Abhisar Buildwell Pvt. Ltd. As per observations made by the Special Auditor, appointed in the case of M/s Dharampal Satyapal Ltd., the assets of the demerged Units, included assets acquired out of amount of Excise Duty Exemption (accounted as Deferred Govt. Grant in the books of the demerged company). The year wise amount spent in the case of the assessee company is given as under: (in Rs) Particulars Up to 31.3.2010 F.Y.2010-11 Upto 31.3.2011 Plant & Machinery 40,34,32,866 - 40,34,32,866 Civil Works 15,38,19,306 - 15,38,19,306 Total 55,72,52,172 - 55,72,52,172 As per the scheme of demerger, all the assets and liabilities, have been vested in the resultant/ assessee Company. Further, all the incentives, subsidies and other benefits enjoyed like excise duty, income tax concession and exemptions, incentives granted by Central and State Govts., local authority or by another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 55,72,52,172/- and the excess claim of depreciation made by the appellant company to the tune of ₹ 3,54,15,791/-, has been disallowed. (v) In the appellate proceedings, the appellant has reiterated the arguments submitted in the assessment proceedings and has also submitted that the excise duty refund is a revenue receipt, which has been credited to the P & L Account. The nature of the excise duty refund received is like a benefit of cash assistance, arising from business and therefore, same will form part of profits and gains from business. Accordingly, it is submitted by the AR that in view of the fact that the excise duty refund is a revenue receipt and therefore, same cannot be further reduced from the block of assets, for determining depreciation on the reduced WDV. For the above view, the AR has also relied upon the judgment of the Apex Court in the case of Commissioner of Income Tax vs. Meghalaya Steels Ltd. [2016] 383 ITR 217, wherein it has been held that the subsidy forming part of P&L Account, being revenue in nature, has to be treated as derived from business or an industrial undertaking and will form part of business income, on which deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the resulting companies and there is no scope for making any disallowance against claim of depreciation made on such acquired value of assets, without reducing the Excise duty refund. However, the excise duty refund, was always credited to the P & L Account and therefore, it was always treated as revenue receipt in the books of account from A.Y. 2007-08 onwards. However, the appellant did not make submission before the A.O. as well as before Ld. CIT(A), regarding nature of excise duty refund. However, the submissions now made on account of nature of excise duty refund and decision of Apex court in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC), was not available earlier. Therefore, it is submitted that now the ratio led down by the Hon'ble Supreme Court, is equally applicable to the facts of the appellant, since the excise duty refund is a revenue receipt, forming part of profits and gains, arising from business. Therefore, as per AR, this excise duty refund has already suffered tax. On identical facts, as to whether excise duty refunds are revenue receipt or capital receipt, the jurisdictional High Court in the case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce the value of the assets, even where the amount of subsidy received was transferred to the capital account of the partners, and it was held that the cost of assets could not be reduced by the amount of subsidy while working out the depreciation allowance. From the above, following facts emerged: The excise duty refund is given to the appellant on account of the manufacturing activities carried out in the notified area, upon fulfillment of certain conditions; and The Excise duty refund, is derived from the manufacturing activities and purchasing the assets from this excise duty refund on fulfillment of certain conditions, is nothing, but application of profits, The excise duty refund is of the nature of revenue receipt, forming part of Profits and Gains, arising from business. The same is a revenue receipt, as has been held by Hon'ble Supreme Court, in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC) and therefore, this excise refund, being a revenue receipt, cannot be reduced from the cost of Plant & Machinery. From the above, it is clear that the Excise duty refund, is a revenue receipt, forming part of total taxable income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (supra) and also the decision of ITAT in the case of Abhisar Buildwell Pvt.Ltd. vide ITA No.823/Del/2015. If the claim of depreciation of the assessee is allowed, then the assessed income will turn into negative income and there will be no question of claim u/s 80IC which will render the Revenue's appeal academic. If at all the Assessing Officer takes the decision to disallow the depreciation, then he will consider the claim of deduction u/s 80IC as per the direction of the learned CIT(A) in paragraph 5.5 of his order, which reads as under:- "5.5 Considering the entire facts and circumstances of the case, / admit the audit report in form 1OCCB as fresh evidence and the same has been examined by the assessing officer on merits as well. No further opportunity is required as such. / have considered the judicial pronouncement relied by Ld. AR that the audit report in form 10CCB can be submitted before the first appellant authority specially under the circumstances when loss was claimed in return of income which was converted into positive income by making addition by the assessing officer. Accordingly, the assessing officer is directed to allow deduction u/s 80/C as per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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